Oil Price Fundamental Daily Forecast – Will Trump Follow-Up Bearish Comments with a Threat?

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Tuesday following yesterday’s steep drop. The price action suggests that Monday’s break may have been too much, too fast, given the current fundamentals. The catalyst behind the sell-off was a comment from President Trump, calling for OPEC to ease its efforts to boost the market.

At 09:58 GMT, April WTI crude oil futures are trading $55.56, up $0.08 or +0.13% and May Brent crude oil is trading $65.17, up $0.26 or +0.40%.

Traders are saying that Trump’s comments carry more weight at this time because U.S. legislators are resurrecting a bill that would make OPEC subject to U.S. antitrust laws.

Traders are also saying that while Trump may be trying to nudge prices lower, the U.S. sanctions by the United States against oil exporters Iran and Venezuela have contributed to the recent gains and are helping to provide a floor for prices along with the OPEC-led production cuts that have been cutting output by 1.2 million barrels per day (bpd) since January 1.

Forecast

Trump’s comments somewhat offset the optimism created by the positive outlook for a U.S.-China trade deal. However, prices may have weakened anyway since traders are now questioning the lack of details so far revealed about the current trade negotiations.

Furthermore, OPEC and its allies may counter Trump’s complaints about their production cuts and high oil prices by bringing up the sensitive topic of the U.S. sanctions against Iran and Venezuela. The U.S. is not likely to abandon their stance on these two issues because it would be a sign of weakness.

President Trump can, however, exert a bearish influence on prices if he agrees to extend the Iranian sanction exemptions since the market expects the U.S. to allow those exemptions to lapse later this year.

“When you read into the implication of Trump’s tweet, it’s twofold. First you have to believe the Saudis are going to take note. They have in the past,” said John Kilduff, founding partner at energy hedge fund Again Capital.

“And then you have to believe that another round of waivers on the Iran sanctions has to be on the table, and I think that’s the secondary implication from that tweet.”

The trend is still up and the OPEC-led production cuts continue so buyers may be stepping in on this break. We could be looking at a technical bounce today as investors assess Trump’s comments. If Trump continues his rant, or makes threats, prices could plunge again. However, if he remains quiet, we should see a rangebound trade develop.